Action plummets at University Lands sale

Published 12:11 pm, Thursday, March 22, 2012

Lisa Jimenez and others with University Lands, looks over bids Thursday during the 121st oil and gas lease sale. Photo by Tim Fischer/Midland Reporter-Telegram

Lisa Jimenez and others with University Lands, looks over bids Thursday during the 121st oil and gas lease sale. Photo by Tim Fischer/Midland Reporter-Telegram

Photo: Tim Fischer

Action plummets at University Lands sale

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The bidding frenzy that drove the last three University Lands lease sales to record highs cooled Thursday as the Board for Lease held its 121st oil and gas lease sale.

After bids were opened, University Lands brought in $27.816 million, down significantly from the $310 million from the September 2011 sale and the March 2011 sale, which brought in $247 million.

In September 2010, University Lands officials received $210 million for leases, four times higher than the previous record.

The University Lands Board for Lease is made up of members of the University of Texas and Texas A&M University systems and Texas Land Commissioner Jerry Patterson.

“We’ve fallen back to pre-run-up levels,” said Jim Benson, executive director. “I’m still pleased at the continued interest in our acreage. Though this isn’t a record, $27 million is still a good number.”

He said he believes Thursday’s results are “more normal” and that the record-setting sales were “a reaction to the shale plays and companies seeking large acreage positions.”

Of the 388 tracts comprising 228,500 acres offered Thursday, Benson said 47 percent was leased at an average $644.74, which was very similar to the 117th sale.

The high bid of $4.667 million was for two tracts that straddled the Upton and Reagan County lines, made by Veritas 321 Energy partners, averaging $7,123 an acre.

Nominations shifted from a focus on areas where the Wolfberry was explored south to Crockett, Reagan and Upton counties because “we simply don’t have acreage left in those hot areas,” Benson said. “We have only 6,000 acres left in Reagan, Crockett and Upton counties and the high bids were in those areas.”

J.D. Smith, land manager with Texas County, unsuccessfully bid on 14 tracts in Terrell County for Subterra Exploration. He expressed surprise at losing, thinking the tracts only comprised pasture.

“In each tract, there were two bids, us and a competitor,” Smith said. Bidding against Chalfant Properties, he noted the two bids were only about $1,600 apart. Escondido Resources II LLC’s bid was almost three times what Subterra submitted.

The fact that Subterra had competition for each tract “makes us wonder if we’re not onto something,” Smith said, adding that Subterra is looking at horizontal drilling in the area.

It was Subterra’s first time to bid on university lands, he said.

Of the 2.1 million acres in West Texas overseen by University Lands, about 1.3 million acres is already leased. Subtracting 500,000 acres in El Paso and Hudspeth counties, Benson said that leaves 1.6 million acres to be leased for oil and gas activity. “We have about 300,00 acres left,” Benson said. “We’re close to being totally leased up.” And when that happens, he said, “We’ll drill.”